Add a File Record Audio Record Video Question 3 (7 points) Angelo is considering the purchase of a new equipment to replace an old one. Both items have a 25% CCA rate. The new equipment costs $14,300 and have a useful life of four years, at which time it will have a salvage of zero. The old equipment can be sold now for $630 and could be scrapped for $380 in four years. The operating revenues will increase annually by $9,300 with the new equipment. The tax rate is 22% and the required rate of return is 15%. What is the present value of CCA tax shield for the new equipment? [1.5 marks] What is the present value of incremental operating cashflow for the new equipment? [2 marks] iii. What is the NPV of the replacement decision? Should Angelo replace the old equipment with the new one? [3.5 marks] ii. Paragraph V BI U Add a File Record Audio Record Video Next Page Page 1 of 11 C G Search or type URL + $ % & 3 4. ( 5 6 7 00* 9 0 E R T T Y o F. G H J K K L C V B N command o Add a File Record Audio Record Video Question 3 (7 points) Angelo is considering the purchase of a new equipment to replace an old one. Both items have a 25% CCA rate. The new equipment costs $14,300 and have a useful life of four years, at which time it will have a salvage of zero. The old equipment can be sold now for $630 and could be scrapped for $380 in four years. The operating revenues will increase annually by $9,300 with the new equipment. The tax rate is 22% and the required rate of return is 15%. What is the present value of CCA tax shield for the new equipment? [1.5 marks] What is the present value of incremental operating cashflow for the new equipment? [2 marks] iii. What is the NPV of the replacement decision? Should Angelo replace the old equipment with the new one? [3.5 marks] ii. Paragraph V BI U Add a File Record Audio Record Video Next Page Page 1 of 11 C G Search or type URL + $ % & 3 4. ( 5 6 7 00* 9 0 E R T T Y o F. G H J K K L C V B N command o